1.) Pierce Corporation issues gift certificates in denominations of P 300, P 500 and P 1,000. These gift certificates are redeemable in merchandise and expire one year after the issue date. The company’s gross profit is an average of 30%.

Based on past experience, an average of ½ of 1% of total gift certificates sold will not be redeemed by reason of expiration. The company records revenue as certificates expire.

During 2020, the company sold P 2,000,000 gift certificates through its licensed distributors. At the end of the year, total redeemed gift certificates had a sales value of P 1,280,000.

REQUIRED:

Prepare all journal entries pertaining to the above information. Assume that Pierce uses periodic inventory system.

2.) During the year 2019, the Taylor Company started a promotional campaign for the sale of its car wax products. A coupon is attached for each unit of car wax sold. For every five coupons plus P 50, a customer can avail of a bottle of tire black which sells for P 150. Each tire black costs the company P 100. The following information relates to the sale of car wax and coupons redeemed and expected to be redeemed in the future:

	2019	2020
Sale of car wax	140,000 units	200,000 units
Selling per unit of car wax	P 500
Coupons redeemed	40,000	90,000
Coupons expected to be redeemed in the future ( year-end estimates)	30,000	80,000

a.) Provision for unredeemed coupons at the end of 2019 and 2020.

REQUIRED: Compute for the following:

b.) The amount of total revenue recognized for each year 2019 and 2020 as a result of the foregoing.

3.) Van Department store grants loyalty awards to its customers. For every P 500 purchase made by the customer, the customer receives a credit of 10 points equivalent to P 10. The accumulated points may be used by the customer as part or full payment for merchandise purchased in the future.

During the year 2019, the company made sales aggregating P 5,000,000 on which 100,000 points were awarded to customers. Of the p 5,000,000 on which 100,000 points were awarded to customers. Of the P 5,000,000, 2% is considered to be allocable to the customer loyalty awards. During the same year, 25,000 points were redeemed, and at December 31,2019, it is expected that a total of 90,000 points would be redeemed relating to 2019 sales.

During 2020, an additional 35,000 points awarded in 2019 were redeemed and Van Department store revised its estimate of total redemption for points granted in 2019 at 95,000 points.

REQUIRED:

a.) Determine the amount of revenue recognized as a result of redemption of reward points in years 2019 and 2020.

b.) Determine the amount of liability to be presented in the statement of financial position relating to customer loyalty awards at December 31,2019 and December 31, 2020.

Answer rating: 100% (QA)

It is required to find solutions for the problems as per the details given as under 1 Gift certificates sales P 2000000 Gift certificate redemption P 1280000 The given above are the details of gift ce... View the full answer